Cases For A Green Recovery

Dave Roberts of Grist puts it this way: “As long as going green is viewed as an expensive and vaguely altruistic undertaking, it will never be a top priority.”

But renewable energy isn’t some Mother’s Day card, and pundits and investors on the left and in the center are trying to drive that point home.

The undeniable fact is that going green would create jobs. Various proposals come up with different numbers (Center for American Progress says 2 million; the U.S. Conference of mayors says 4.2 million; and presidential candidate Barack Obama says 5 million), but there’s no model in which jobs aren’t created.

Roberts argues in another post that deficit spending with concrete results, i.e., a new, and more sustainable energy infrastructure, is a good way to emerge from a recession.

But, he points out, creating a cap-and-trade system brings revenue in. Brad Plumer of The New Republicargues that cap-and-trade wouldn’t bring much money in at first, but it would end the climate of uncertainty in which businesses are currently operating. Either way, cap-and-trade is an economic winner.

Several smaller-scale arguments also make the case that a greener economy being a better economy. First, public education on energy conservation would save struggling families money, potentially saving them from defaulting on their mortgage. Even relatively affluent families can benefit by changing their consumptive mindset. Greener development can save municipalities and their residents good money.

Finally, there’s what I think is the mother of all arguments: the Stern Report. Its author, Sir Nicholas Stern, formerly of the World Bank, is not some treehugger. Yet, here is the premise of his 2006 report:

Climate change presents a unique challenge for economics: it is the greatest and

widest-ranging market failure ever seen. The economic analysis must therefore be global, deal with long time horizons, have the economics of risk and uncertainty at centre stage, and examine the possibility of major, non-marginal change.

Here is his overall conclusion:

Tackling climate change is the pro-growth strategy for the longer term, and it can be done in a way that does not cap the aspirations for growth of rich or poor countries. The earlier effective action is taken, the less costly it will be.

With British understatement, the report argues that:

With 5-6°C warming – which is a real possibility for the next century – existing models that include the risk of abrupt and large-scale climate change estimate an average 5-10% loss in global GDP, with poor countries suffering costs in excess of 10% of GDP. Further, there is some evidence of small but significant risks of temperature rises even above this range. Such temperature increases would take us into territory unknown to human experience and involve radical changes in the world around us.

That is the cost of inaction, according to Stern. The cost of action, he argues, is just 1% of GDP. Pay 1% now, or pay 5-10% later with greater risk to your personal health and safety, but pay either way. Most investment counselors would agree, paying now is the better move. And, in California’s case, moves to combat climate change show early signs of boosting the state’s economy.